Understanding Closing Costs on a Home Sale or Purchase in NC

What Are Closing Costs?

Closing costs are a collection of fees that both buyers and sellers must pay when transferring
property ownership. These costs cover a variety of services and expenses associated with
processing the sale, securing financing, and ensuring that the title to the property is clear. While
the specifics of closing costs can vary based on the sale price of the home, location, and other
factors, these costs generally represent anywhere from 2% to 5% of the home’s purchase price.

In North Carolina, closing costs are typically divided between the buyer and the seller, but the
specific division can depend on the terms of the contract. Buyers usually pay the bulk of the costs
related to securing financing, while sellers often cover fees related to the transfer of the property.

Closing Costs for Buyers in North Carolina

For buyers, the costs of purchasing a home in North Carolina can add up quickly. While some of
the fees are common nationwide, there are a few costs specific to the state. Here’s a breakdown
of common closing costs for buyers:

1. Loan Origination Fees

These fees are charged by the lender to process the new mortgage loan. It typically includes the
cost of underwriting, loan preparation, and other administrative tasks related to the approval and
disbursement of your loan. Loan origination fees can range from 0.5% to 1% of the loan amount.

2. Appraisal Fee

An appraisal is required by the lender to assess the value of the property you’re purchasing. This
helps ensure that the home is worth the loan amount. In North Carolina, the cost of an appraisal
generally ranges from $350 to $500, though this can vary depending on the location, size, and
complexity of the property.

3. Home Inspection Fees

While not always required, a home inspection is an essential step in the home-buying process. It
helps buyers identify any potential issues with the home that could affect its value or require
costly repairs. Home inspections typically cost between $300 and $500 in North Carolina.

4. Title Search and Title Insurance

Title insurance protects the lender (and sometimes the buyer) from issues related to the title of
the property, such as liens or disputes over ownership. The cost of a title search and title
insurance can vary, but buyers in North Carolina typically pay between $300 and $1,000 for title
related services.

5. Prepaid Property Taxes and Insurance

In North Carolina, you may need to pay a portion of your property taxes at closing, depending on
when your purchase takes place in the tax year. Additionally, lenders may require you to prepay
homeowners insurance premiums for the first year of coverage.

6. Closing Attorney Fees

North Carolina law requires that a real estate attorney be involved in every home purchase
transaction. The attorney’s role includes reviewing contracts, ensuring the legal aspects of the
transaction are in order, and facilitating the closing process. The typical attorney fee for closing
in North Carolina ranges from $500 to $1,500.

7. Escrow Fees

Escrow fees are paid to the escrow company or agent that handles the distribution of funds and
documents during the closing process. These fees can vary, but buyers in North Carolina can
expect to pay around $200 to $500.

8. Recording Fees

These fees cover the cost of recording the deed and mortgage with the county register of deeds,
making the transaction official. The cost of recording fees varies by county but generally ranges
from $50 to $100.

Closing Costs for Sellers in North Carolina

Sellers also have their share of closing costs in a home sale. While the specifics of these costs
depend on the negotiated terms, there are several fees that are commonly associated with selling
a home in North Carolina:

1. Real Estate Agent Commission

One of the largest expenses for sellers is the real estate agent commission. In North Carolina, the
typical commission rate for a real estate agent is around 5% to 6% of the sale price, which is
usually split between the buyer’s agent and the seller’s agent. This can be a significant expense,
depending on the price of your home.

2. Title Insurance and Title Search

While buyers typically pay for their own title insurance, sellers are usually responsible for
providing title insurance for the buyer as part of the transaction. In some cases, sellers also pay
for a title search to ensure the property title is clear of any liens or legal disputes. These costs can
vary but typically range from $1,000 to $2,000.

3. Repairs and Inspection Costs

If the buyer’s home inspection reveals any issues with the property, the seller may be required to
pay for repairs or offer a credit to the buyer to cover the costs. In some cases, the seller may also
choose to pay for certain repairs upfront in order to make the home more marketable.

4. Transfer Taxes

North Carolina charges a deed transfer tax of $1 per $500 of the sale price. This cost is typically
paid by the seller, though it can sometimes be negotiated.

5. Mortgage Payoff Fees

If you have an outstanding mortgage on the property, you will need to pay off the remaining
balance at closing. Depending on your lender, there may be additional fees for paying off the
mortgage early, especially if there are any prepayment penalties associated with your loan.

6. Attorney Fees

As with buyers, sellers in North Carolina must also work with an attorney for the closing. The
attorney will ensure the legal aspects of the sale are handled properly, prepare the necessary
documents, and ensure that the closing proceeds smoothly. Fees for the seller’s attorney can
range from $500 to $1,500.

How Much Are Closing Costs in North Carolina?

The total amount of closing costs for both buyers and sellers in North Carolina will vary
depending on the price of the home, the type of mortgage, and the specific fees associated with
the transaction. However, buyers can typically expect to pay between 2% and 5% of the home’s
purchase price in closing costs, while sellers will usually pay between 5% and 10% of the sale
price.

For example, on a $300,000 home purchase, buyers can expect to pay anywhere from $6,000 to
$15,000 in closing costs. Sellers might pay around $15,000 to $30,000 in closing costs,
depending on the final sale price and commission fees.

How to Reduce Closing Costs